Microsoft trims 2026 AI capex outlook

Microsoft adjusts 2026 capital spending plans

Microsoft has lowered its calendar-year 2026 capital expenditure forecast to about $175 billion, revising down an earlier projection. The change comes as the company reassesses the pace and structure of its data centre and infrastructure investments tied to artificial intelligence services.

The revised forecast follows a decision to extend the estimated useful life of Microsoft’s data centres and office buildings from 15 years to 25 years. This accounting change spreads depreciation over a longer period and contributes to a lower capital expenditure outlook while AI-related infrastructure remains a major focus.

Capital spending remains central to Microsoft’s strategy as it expands computing capacity to support AI services. The company continues to balance very high investment levels with efforts to improve efficiency and returns on those outlays.

Microsoft has experienced delays in some third-party capacity deliveries that had been expected in the first quarter. These delays have affected the timing of data centre capacity coming online and are one factor behind the adjustment in capital expenditure plans.

The company’s infrastructure buildout is taking place amid growing public and political opposition to data-centre construction in parts of the United States. These broader conditions add complexity to the deployment of new facilities even as demand for AI computing capacity rises.

While revising its spending plans, Microsoft reported quarterly revenue of $92.28 billion. Azure cloud growth reached 48%, surpassing the company’s forecast and analyst estimates, underscoring strong demand for its cloud and AI services.

Microsoft generated free cash flow of $18.6 billion, significantly above analyst expectations. The combination of robust cloud growth and strong cash generation supports the company’s ability to fund its large-scale AI and data centre investments even as it refines the level and timing of those expenditures.

Microsoft is offering voluntary buyouts to 60,000 employees as it continues to invest heavily in its data centre footprint. The company opened 31 new data centres in the last quarter, adding materially to its global cloud capacity.

Even with the reduction to about $175 billion in expected 2026 capital expenditure, Microsoft’s planned spending remains significantly above its 2025 levels. The company is also deploying custom chips, including an inference accelerator called Maia 300, as part of its efforts to reduce data centre costs and improve AI computing efficiency.